The Cost Inflation Index (CII) is an important concept under the Income Tax Act used to calculate indexed cost of acquisition for long-term capital gains. It helps adjust the purchase price of an asset for inflation so that taxpayers pay capital gains tax only on the real increase in value, not just inflation.

In India, the Income Tax Department notifies the Cost Inflation Index every year, and it is mainly used when calculating capital gains tax on property, land, and other long-term capital assets.

If you are selling property, inherited property, or long-term investments, understanding the CII table and indexation calculation can help significantly reduce your taxable capital gains.

This guide provides the latest Cost Inflation Index table for India along with examples and explanations.

Cost Inflation Index Table (2001–2026)

The base year for capital gains indexation is 2001-02, where the index value is 100.

These index numbers are used to calculate the indexed cost of acquisition while computing long-term capital gains.

What is Cost Inflation Index?

The Cost Inflation Index is a government-notified number used to adjust the purchase price of an asset for inflation.

Since inflation reduces the value of money over time, the government allows taxpayers to increase the cost of acquisition using CII, which reduces taxable capital gains.

This adjustment process is called indexation.

Indexation helps ensure that taxpayers are taxed only on the real profit made on a capital asset.

Formula for Indexation

The indexed cost of acquisition is calculated using the following formula:

Indexed Cost of Acquisition = Purchase Price × (CII of Sale Year ÷ CII of Purchase Year)

This formula increases the purchase cost to reflect inflation over the years.

Example of Capital Gains Calculation Using CII

Suppose a property was purchased in 2005 for ₹10,00,000 and sold in 2025 for ₹50,00,000.

CII values:

• CII in 2005-06 = 117

• CII in 2024-25 = 363

Indexed cost calculation:

Indexed Cost = 10,00,000 × (363 ÷ 117)

Indexed Cost = ₹31,02,564 (approx.)

Capital Gains:

Sale Price = ₹50,00,000
Indexed Cost = ₹31,02,564

Long-term Capital Gain = ₹18,97,436

Without indexation, capital gain would appear as ₹40,00,000, so indexation significantly reduces the taxable amount.

When is Cost Inflation Index Used?

CII is mainly used for calculating long-term capital gains in the following situations:

• Sale of residential property

• Sale of land or plots

• Sale of inherited property

• Sale of gifted property

• Sale of commercial property

• Capital gains calculation for investments held long term

However, indexation benefits apply only when the asset qualifies as a long-term capital asset under the Income Tax Act.

Indexation for Property Purchased Before 2001

If a property was purchased before 1 April 2001, the Income Tax Act allows taxpayers to use the fair market value (FMV) as of 1 April 2001 as the cost of acquisition.

In such cases, the CII of 2001-02 (100) is used as the base index.

This rule simplifies capital gains calculations for very old properties.

If you are selling an old property, valuation from a registered valuer may be required to determine the FMV as of 2001.

Use Our Capital Gains Calculators

You can also use our free calculators on Cashiwali to simplify your capital gains calculations:

• Property Capital Gains Tax Calculator

• Indexed Cost of Acquisition Calculator

• Section 54 Exemption Calculator

• Section 54F Exemption Calculator

• Section 50C Stamp Duty Impact Calculator

These tools help estimate your capital gains tax liability quickly.

Frequently Asked Questions (FAQs)

What is the base year for Cost Inflation Index?

The base year for the Cost Inflation Index is 2001-02, where the index value is set at 100.

Why is the Cost Inflation Index used?

The Cost Inflation Index adjusts the purchase price of an asset for inflation so that taxpayers pay tax only on the actual gain and not inflationary gains.

Is indexation allowed for all capital assets?

Indexation is available only for long-term capital assets. Short-term capital gains are calculated without indexation benefits.

Can indexation be used for inherited property?

Yes. When calculating capital gains on inherited property, the original purchase year of the previous owner is considered for indexation.

Is indexation applicable for property purchased before 2001?

Yes. If the property was purchased before 1 April 2001, the taxpayer can use the fair market value as of 1 April 2001 as the cost of acquisition.

Need Help With Capital Gains Tax?

Calculating capital gains on property can involve several factors such as:

• indexation calculation

• stamp duty valuation under Section 50C

• exemptions under Section 54 or Section 54F

• capital gains account scheme (CGAS)

Professional guidance can help ensure the calculation is correct and legally optimized.

If you need assistance with capital gains tax calculation, property sale taxation, or income tax planning, you can contact:

CA Shiwali Dagar
Chartered Accountant – South Delhi

🌐 Website: https://cashiwali.com
📞 Call / WhatsApp: 9266032777